Which of the following statement(s)is/are true? (A)If a division's return on investment (ROI)exceeds its cost of capital,then its residual income is positive.
(B)If a division's cost of capital equals its return on investment (ROI),then its residual income is zero.
A)only (A)is true
B)only (B)is true
C)both (A)and (B)are true
D)neither (A)and (B)is true

Question

Quizplus · Accepted Answer

(A) is true because residual income is calculated as ROI minus cost of capital multiplied by average invested assets. If ROI exceeds cost of capital, then the residual income would be positive. 
(B) is also true because if cost of capital equals ROI, then the residual income would be zero as the calculation of residual income would result in zero. Therefore, both (A) and (B) are true.

Which of the Following Statement(s)is/are True? (A)If a Division's Return